Financing of Solar Energy Projects

Funding assumes special significance in any solar project execution mainly because of the following basic features of solar projects:

1. Large one time capital investment requirement.
2. Longer tenure funding requirement to match with the project cash flows.
3. Funding costs decide the competitive edge of the project developer in quoting low tariff in the bidding process.
4. Funding costs constitute a major component in the opex costs of any solar project.

One of the first steps to promote any commercial or utility-scale solar project involves planning of the project financing. While cash will always be king, solar projects require a significant upfront investment, which makes financing more complex for most of the project developers.

Tax incentives, inexpensive debt and prudent matching strategies drive a robust and diverse solar project finance market place. 

We at FURS understand this and accordingly attach special importance for financing of any solar project handled by us. After studying the cash flows of the project worked out by our technical team, our finance team will identify and evaluate the best available and cost effective financing options and suggest the same to our clients. We present all the possible funding options to the clients and take their views before finalizing the financing structure and proceeding for arranging the funding.

Our Finance Head has substantial senior level experience in project finance arena including capex funding of many solar projects. He has the expertise to explore the right kind of financing options available in the domestic and international markets and negotiate the best terms before arriving at financial closure. Access to cheap international funding sources and the ability to negotiate the best terms suited the project cash flows will set FURS on a very strong footings in this competitive industry.

Govt of India is encouraging adoption of solar energy by every Indian. To promote convenient adoption and use of solar energy, Finance ministry and RBI have advised public sector banks & private banks to consider funding solar projects under infrastructure funding category by releasing appropriate directives to offer loans to solar projects at reasonable cost.

The financing of solar PV projects typically comprises of two parts: an equity investment and project financing to cover the debt portion. We conduct evaluation of the funding options, both from the equity partners and project finance partners view point. We also conduct an evaluation of the project covering the legal aspects, permits, contracts (EPC and O&M), and technical issues prior to achieving financial closure.

The project financing team at FURS evaluate and identify the risks and methods of mitigating any risks through a thorough due diligence process prior to investment. Where the project has inherent risks, the exposure to these risks will be negotiated between the parties and reduced wherever possible with insurance cover etc.